Why Jardine is unlikely to pull the plug

COMMENT: "It is quite something when one of the once great names of British industry becomes nothing more than a penny stock punt for he spivvier end of the stock market"

It is quite something when Trafalgar House, once one of the great names of British industry, becomes nothing more than a penny stock punt for the spivvier end of the stock market. But yesterday's price gyrations in another session of extremely heavy volume confirmed that to be the case.

It is no surprise that cocktail party gossip in the colony's dying days is all about the Keswicks' latest disaster, the collapse of Jardine Matheson's escape tunnel from the Chinese authorities that the so-called Noble House has always failed to appease. There are few places where loss of face stings so harshly.

What is most remarkable is the way that, so far, Henry and Simon Keswick have survived the loss to Jardine's shareholders of so much of their investment in Trafs. Maybe the bargain hunters that swept the shares off their lows yesterday are right to gamble that the brothers would never dare to crystallise the loss of the pounds 300m they have poured in to the sinking conglomerate since 1992. In the context of a giant trading empire such as Jardine, pounds 300m may not be life-threatening but it is the sort of fouled-up investment that would rightly be the end of many a chief executive

Clinging on and hoping for the best is unlikely to be a realistic option for Hongkong Land, the subsidiary through which Jardine took the ill- conceived stake. If Trafs is to survive its current deep-seated problems it must pare down to its contracting and engineering core, selling off Cunard and Ideal, the housebuilder, and inject enough new cash to convince customers the company has a viable future. Jardine must risk throwing good money after bad.

If Trafs were a manufacturing business, the strength of its product might be enough to pull it through. But in engineering and contracting, confidence is all - customers will simply not consider placing orders with a company under a cloud as large and dark as that hanging over Trafalgar.

The other reason Jardine will probably avoid pulling the plug is the doubt doing so would cast on the company's whole strategy. It has got things wrong before, investing in UK property just before the 1970s collapse, for example, but with the imminent arrival of the Chinese in Hong Kong the stakes are immeasurably higher this time round. Not that Hongkong Land's continued support necessarily makes Trafs' battered shares any more attractive. Only when the full extent of the damage to the company's balance sheet is revealed in December will anything but the utmost caution be appropriate.

Thorn music sweeter than CBI presidency

The Confederation of British Industry is still an important and influential organisation but Sir Colin Southgate, chairman of Thorn EMI, can hardly be blamed for turning down its presidency. Over the next year or two, he is going to have his work more than cut out. Thorn EMI may not yet be in play, but it is pretty close to it. If Sir Colin decides to push ahead with plans to demerge the company's music and TV rental businesses, then it certainly will be. The music side, with its galaxy of stars and copyright, is one of the three biggest record labels in the world and the only one that it is even remotely possible to buy. As the multi-media revolution gathers pace, it becomes increasingly attractive.

Plainly it makes strategic sense to demerge the TV rental business, which is about as relevant to music as a ten-bob note. From a shareholder value point of view, it also makes commercial sense. TV rental and music as separately quoted companies would almost certainly be worth more than the two companies combined. But from the point of view of keeping the core music business independent and British - which Sir Colin is keen to do - it may make no sense at all. Once stripped of TV rental, the music side becomes even more easy to purchase. There's the conundrum.

And if the purpose of all this is only one of maximising shareholder value, there may be better ways of doing it. One method would be to put the music side up for sale (likely price pounds 5bn plus) and make it subject to a trade auction. Certainly Thorn EMI has already had approaches along these lines. The proceeds could then be handed back to shareholders by way of special dividend, allowing gross funds to claim a thumping great tax credit on top.

There is, however, one way in which the trick of both demerging and remaining independent might be accomplished. This would be to accompany the demerger with the acquisition by the music side of a more appropriate business - say in publishing. If that is what Sir Colin has in mind, it is no wonder he hasn't got time for the CBI.

Clarke wrestles with housing conundrum

Kenneth Clarke today meets with his Treasury team at the country getaway of Dorneywood with fresh calls for action to help the housing market ringing in his ears.

At first blush, the latest dispatch from the battlefront of Arcadia Avenue could hardly be gloomier. Cornerstone, the rump of what was once the country's largest privately owned estate agency chain, went bust yesterday. Meanwhile, building societies said that their net lending had fallen by one-fifth in September. Banks also reported a decline in their mortgage lending - this in the last month before the new mortgage insurance provisions came into effect.

All powerful ammunition for the societies in their lobbying for help in the Budget. The favoured tax break is now the removal of stamp duty, which at around pounds 500m on residential property would at at least have the merit of not costing an arm and a leg. But even if the Chancellor were not in the tight fiscal corner that he finds himself, he might think twice before granting the building societies their wish. There are signs that the housing market may already be recovering from this year's renewed slump.

Earlier this month, the Bank of England published figures showing a big jump in the number of loans approved in August by banks and building societies. In fact they reached their highest level so far this year. We now know that building societies increased their loan approvals in September, too.

Not all loan approvals translate into actual purchases, but they at least indicate whether people are seriously looking for houses. In a few days' time we'll know whether banks also stepped up their loan approvals in September. If this is so, it would show that August was not just a freak month and that the housing market might be poised for revival.

With so little money to spare, Kenneth Clarke is likely to cross his fingers and hope that the housing market is set to recover of its own accord. If he gets it wrong, he won't be the first Chancellor to be misled by the green shoots of recovery.

News
Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Sport
Arsenal supporters gather for a recent ‘fan party’ in New Jersey
football
Sport
sportDidier Drogba returns to Chelsea on one-year deal
Arts and Entertainment
The Secret Cinema performance of Back to the Future has been cancelled again
film
PROMOTED VIDEO
Life and Style
Balmain's autumn/winter 2014 campaign, shot by Mario Sorrenti and featuring Binx Walton, Cara Delevingne, Jourdan Dunn, Ysaunny Brito, Issa Lish and Kayla Scott
fashionHow Olivier Rousteing is revitalising the house of Balmain
News
people
Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
News
BBC broadcaster and presenter Evan Davis, who will be taking over from Jeremy Paxman on Newsnight
peopleForget Paxman - what will Evan Davis be like on Newsnight?
Life and Style
fashionCustomer complained about the visibly protruding ribs
Voices
The new dawn heralded by George Osborne has yet to rise
voicesJames Moore: As the Tories rub their hands together, the average voter will be asking why they're not getting a piece of the action
Sport
Dejan Lovren celebrates scoring for Southampton although the goal was later credited to Adam Lallana
sport
News
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Arts and Entertainment
Jo Brand says she's mellowed a lot
tvJo Brand says shows encourage people to laugh at the vulnerable
Life and Style
People may feel that they're procrastinating by watching TV in the evening
life
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior Risk Manager - Banking - London - £650

£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

The benefits of being in Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

Test Analyst - UAT - Credit Risk

£280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Evan Davis: The BBC’s wolf in sheep’s clothing to take over at Newsnight

The BBC’s wolf in sheep’s clothing

What will Evan Davis be like on Newsnight?
Finding the names for America’s shame: What happens to the immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert?

Finding the names for America’s shame

The immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert
Inside a church for Born Again Christians: Speaking to God in a Manchester multiplex

Inside a church for Born Again Christians

As Britain's Anglican church struggles to establish its modern identity, one branch of Christianity is booming
Rihanna, Kim Kardashian and me: How Olivier Rousteing is revitalising the house of Balmain

Olivier Rousteing is revitalising the house of Balmain

Parisian couturier Pierre Balmain made his name dressing the mid-century jet set. Today, Olivier Rousteing – heir to the house Pierre built – is celebrating their 21st-century equivalents. The result? Nothing short of Balmania
Cancer, cardiac arrest, HIV and homelessness - and he's only 39

Incredible survival story of David Tovey

Tovey went from cooking for the Queen to rifling through bins for his supper. His is a startling story of endurance against the odds – and of a social safety net failing at every turn
Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little